sebi:WTM/MSS/ISD/94/2011
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Facts / Headnote
Ashmi Financial Consultancy Pvt. Ltd. restrained from buying, selling or dealing in securities for 3 months and directed to disgorge Rs.79,71,510 along with interest of Rs.43,84,330 (total Rs.1,23,55,840) within 45 days; demat accounts frozen till payment; failure to pay attracts further 7-year restraint.
Provisions invoked
- s. 11(4)
- s. 19
- s. 12A
- s. 301
Regulations
- Reg. 3
Parties
- Ashmi Financial Consultancy Pvt. Ltd.
Holding
Ashmi Financial Consultancy Pvt. Ltd., in concert with three known investors (KOs), financed IPO applications in the RII (retail) category, cornered shares reserved for RIIs, and thereby violated Section 12A(a),(b),(c) of the SEBI Act and Regulations 3(a)-(d) and 4(1) of the PFUTP Regulations. It was restrained from dealing in securities for three months and directed to disgorge Rs.79,71,510 plus interest totaling Rs.1,23,55,840.
Full text
Page 2 of 8 These acts of Ashmi were in violation of Section 12A (a), (b) and (c) of the SEBI Act and regulations 3 (a), (b), (c) and (d) and 4 (1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations). Accordingly, it called upon Ashmi to show cause as to why suitable directions under Section 11(4) read with Sections 11 and 11B of the SEBI Act, 1992, including directions to restrain it from buying, selling or dealing in securities in any manner, disgorge the ill-gotten gains made by it along with interest, and realize the shares in its frozen demat accounts. The SCN also offered opportunities of inspection of documents and personal hearing.
Page 3 of 8 Finance to KOs Refund through Shares from KOs Refund through Cash from KOs Name of IPO Issue Period / Date of Listing Issue Price (Rs.) Name of KO Date Amount (Rs.) Date No. of Shares Value (Rs.) Date Amount (Rs.) 1 2 3 4 5 6=(9+11) 7 8 9 ( 3 * 8) 10 11 06.05.05 1,85,93,750 24.05.05 09.06.05 9,250 150 22,01,500 35,700 20.05.05 21.05.05 24.05.05 1,00,00,000 63,00,000 56,550 Dhaval K Total 1,85,93,750 9400 22,37,200
Page 4 of 8 and Dharmesh sold the shares, received by them on allotment in the IPOs, to Ashmi at negotiated rate. Towards security of loan, Ashmi received 1,88,860 IDFC shares from Dhaval M. At the instruction of Dhaval M, it sold the said shares and transferred the entire sale proceeds to him. d. The funds provided by Ashmi to Dhaval M would have fetched 2,38,602 IDFC shares. However, Ashmi got only 1,88,860 shares. This implies that there is no relation between funding and cornering of shares in the retail category of IPOs. e. The Shoppers IPO was open during the period April 28, 2005 to May 04, 2005, while Ashmi provided funds to Dharmesh and Dhaval K only on May 06, 2005, i.e., after the closure of the issue. Hence the funds were not provided to make applications in the Shoppers IPO. f. The ill-gotten gains Rs.1,13,24,544 alleged in the SCN includes gains in respect of IDFC shares made by Dhaval M and transaction expenses. If these are excluded, the net gain is Rs.47,26,801. Thus, through loan transactions with the KOs, it earned a legitimate profit of Rs.47,26,801 and not the unlawful gain of Rs.1,13,24,544, as alleged in the SCN.
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Source: SecMarx — sebi:WTM/MSS/ISD/94/2011. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.